‘What would constitute an ‘undertaking’ of a company’ has been among the most hotly debated topics in the history of India’s company law regime. This question arises while evaluating whether a transaction falls within the purview of Section 180(1)(a) of the Companies Act, 2013 (“2013 Act”), which corresponds to Section 293(1)(a) of
With effect from October 1, 2023, India’s top 100 listed entities (based on market capitalisation) would have to mandatorily confirm, deny, or clarify market rumours to the stock exchanges, and this requirement extends to the top 250 listed entities with effect from April 1, 2024. The Securities and Exchange Board of India (“SEBI”), by way of notifying amendments to the LODR Regulations on June 14, 2023 (“LODR Amendments”), has introduced this mandatory requirement under Regulation 30 read with Schedule III of the LODR Regulations (referred to below as the “Market Rumours Amendment”).Continue Reading Market Rumours: SEBI’s New Prescription and India Inc’s Dilemma
The Prevention of Money Laundering Act, 2002 (“PMLA”), which came into force w.e.f. July 01, 2005, was enacted pursuant to India’s international obligations inter alia under the Vienna[1] and Palermo[2] Conventions, the Political Declaration and Global Programme of Action (1990)[3] adopted by the UN General Assembly, and to give effect to the recommendations made by the Financial Action Task Force (FATF) for combating money laundering (popularly known as the “Forty Recommendations”)[4].Continue Reading Spotlight: Why PMLA Scheduled Offences need a fresh look?
Even after the ‘right to property’ was abolished as a fundamental right by the 44th Amendment to our Constitution[1], it has continued as a ‘constitutional right’ by virtue of Article 300-A, which provides that – “No person shall be deprived of his property save by authority of law”.Continue Reading Disenfranchising Majority Shareholders – Is it Constitutionally Valid?
Ever since the stock market scam of 2001 (Ketan Parekh Scam) was brought to light, regulators have been vigilant about the use of complex corporate structures to circumvent statutory restrictions and divert company funds. After the magnitude of financial irregularities in the Ketan Parekh Scam came to light, the Joint Parliamentary Committee (“JPC”) and the erstwhile Department of Company Affairs (“DCA”) proposed steps to prevent companies from using the ‘subsidiary route’ to siphon off funds, by providing inter-corporate loans.[1]Continue Reading The Layering Restrictions & WOS exemption – Need for Regulatory clarity
Instances of financial/ accounting frauds and serious corporate governance failures have become endemic in today’s corporate world, leading to huge erosion in shareholder wealth. On most occasions, such irregularities and failures are detected very late, when it becomes impossible to rewind the clock and undo damage that has already been done. Recent cases of financial/ accounting irregularities have demonstrated that several early warning signals (like disclosures made in the ‘notes’ to the financial statements) are often not recognised by the Board of Directors (“Board”) and other gatekeepers of governance – thereby raising serious questions regarding their effectiveness.Continue Reading Why do Boards fail to catch ‘sub-sonic sounds’ within the Organisation?
Convergence of the Indian Accounting Standards (“Ind AS”) with the International Financial Reporting Standards (“IFRS”) can be regarded as the most significant milestone in the Indian accounting paradigm, which has fundamentally altered the rules for the preparation and interpretation of financial statements (“FS”) as also the ground rules for structuring M&A deals.Continue Reading How crucial is knowledge of Ind AS while negotiating an M&A deal?
The cardinal principle of company law, as enshrined under Section 129(1) of the Companies Act, 2013 (“Companies Act”), is that the financial statements (“FS”) should give a ‘true and fair view’ of the state of affairs of the company, comply with the accounting standards notified under Section 133, and also be in the form provided for different classes of companies under Schedule III.Continue Reading Non-compliance with Accounting Standards – Will it amount to an FUTP Offence?
The legal position with respect to enforceability of put option clauses has not been a glorious chapter in the history of India’s securities law. The genesis of this vexed issue lies in – (i) the erstwhile Section 20 of the Securities Contracts (Regulation) Act, 1956 (“SCRA”) which had provided that all options in securities shall be illegal[1]; and (ii) a notification issued by the Ministry of Finance in 1969, which inter alia provided that any contract for sale or purchase of securities, other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities shall be prohibited[2] (“1969 Notification”).Continue Reading Enforceability of Put Options under SCRA – Bombay HC’s latest judgment finally clears the air!
“Forewarned is forearmed” is the cardinal principle underlying company law jurisprudence around the world and the foundation of all disclosure requirements.
Section 129(1) of the Companies Act, 2013 (“Act”), provides that the financial statements (“FS”) shall give a ‘true and fair view’ of the state of affairs of the company, comply with the accounting standards notified under Section 133 of the Act, and also be in the form provided for different classes of companies in Schedule III of the Act.Continue Reading How True is ‘True and Fair’ View?